The thought of retirement should be filled with excitement as you enter your golden years. But with recent stock market issues and economic downturns, we worry if we have enough money to live on when we eventually retire, as we will not want to have to take cash advances during this period. One of the biggest retirement fears is that we may outlive our money. Now that things have changed in the economic environment, it is time to also change our retirement planning to adjust for what has happened. There are a few ways to help us save for our retirement to alleviate any concerns about outliving our income. (more…)

Of all the age groups affected by the recession, the baby boomers who are retiring face the harshest consequences. They have retirement portfolios that might have dropped anywhere from 20 to 40%. They don’t have extra years of income to make up the drop, unless they choose to stay working in part time jobs past their full retirement age. Health care costs are high. If that weren’t enough, the federal government has made it clear that there will probably be no cost of living increase in Social Security for the next two to three years. What are steps that need to be taken to make sure you won’t run out of money in your old age? (more…)

The thought of retirement should be filled with excitement as you enter your golden years. But with recent stock market issues and economic downturns, we worry if we have enough money to live on when we eventually retire, as we will not want to have to take cash advances during this period. One of the biggest retirement fears is that we may outlive our money. Now that things have changed in the economic environment, it is time to also change our retirement planning to adjust for what has happened. There are a few ways to help us save for our retirement to alleviate any concerns about outliving our income. (more…)

In the current financial climate it is important to have a steady income, lower cost of living and good emergency financial plans in place. This is particularly important for those entering or already living in their retirement years.

Usually the process of arranging an easy and comfortable retirement begins with the living arrangements. A majority of retirees make plans to sell their homes and relocate to a more affordable location. This can often include apartments or retirement communities, but they will still need to be in places that have a lower cost of living. This means that selecting an affordable retirement city or town is the wisest step in planning for the “golden years”. (more…)

No matter how old you are, once you secure your first job you should begin to save for retirement. As you know, the earlier you start the more money you will have when you finally decide to hang it up for good. Compound interest is a great thing, and this is just one reason why you need to get your retirement savings into high gear as early as possible.

The way you save for retirement is up to you. Some people rely solely on one plan, such as a 401K, that they have through their employer. This is a particularly good idea if your company offers a “match” up to a certain percentage. After all, who doesn’t want free money?

Of course, you don’t need the help of your employer in order to save for retirement. You can open your own account, such as a traditional or Roth IRA. Both of these are perfect for those who want to plan their own retirement while also taking advantage of many tax benefits.

Finally, don’t forget that you can also save cash. This may not be the best way to earn interest on your money, but there is nothing wrong with keeping a bit of cash in an online savings or other high yield account. This may not be your primary retirement account, but it can go a long way when everything is said and done.

No matter how old you are or how much money you earn you should be saving for retirement. Are you on the ball? Or have you fallen behind?

photo credit: pfala

As many people have personally experienced, those people who are closest to retirement are one of the groups who have been hardest hit by the economic downturn. That means there are adult children who are particularly worried about the state of their parents’ finances, and are looking for ways to be able to help them out - even though they’re not in great financial shape themselves.

A recent discussion at CNN Money looked at helping out a 50-year-old parent who doesn’t have any retirement savings, but the problem is even greater for adult children with parents approaching their 60s.

Some of the problems involve actually convincing your parent that they need to be serious about saving for retirement - for the double reason of their own financial security and making sure that they don’t later become dependent on your finances. Parents don’t usually like to learn from their children, no matter how old they are, so the advice is to introduce the idea of retirement savings as tactfully as possible and with an information focus - educate them (carefully) about 401(k)s and how they could be saving more. Encouraging a parent to set up automatic deductions from their wages to put into savings is also a useful step. But above all, remember they are your parents and probably the hardest of all to advise.

Unfortunately, it’s probably too late for those who had planned to retire in the next couple of years and have just discovered the retirement savings have been so dramatically reduced that they will now have to work a few years longer - but for the next generation of workers, there are a few things you can do to try to avoid such a scenario. Of course, nobody has a crystal ball to see the economy of the future but The Simple Dollar does have some realistic suggestions on tactics that will help lower the risk of the same thing happening:

• Contribute a bit more than is “theoretically” needed to your retirement plan. Adding an extra 1 or 2% won’t make a big difference to your current lifestyle but the compounding effect will definitely help in retirement.
• Change your investment strategies throughout your life. Investing more aggressively when you are younger is fine; as you approach retirement, change your mix to be more conservative - you no longer have the time to wait for the economic cycle to go back in your favor. Some retirement plans will do this automatically for you if you choose their “target retirement fund” options.
• Don’t put any of your money into an investment that you don’t understand or that seems to risky to you. And don’t be afraid to ask plenty of other people for help and advice.
• Assume that you will also do some part-time work in the early years of your retirement, so there will be some additional income to help you out at the start. This is becoming increasingly common as people are still active and healthy when they reach retirement age.

As we’ve seen, the old way of planning financially for your retirement has left many people in serious trouble, including postponing retirement or simply having to make do with less. Experts are now giving lots of tips for re-planning your retirement funding to avoid some of these issues and tips include:

• Make sure your retirement investments are balanced and mixed. Try to spread the money across two or three different strategies.
• Balance your portfolio in regard to yield and risk. Leave some in quality bonds or treasury bills (which don’t provide much yield, but are secure) and invest some in higher-performing (but higher risk) stock funds.
• Consider investing in municipal bonds rather than government bonds, especially if you fit into a higher tax bracket. You get decent security but a much better yield on your investment.
• Take particular notice of stocks that usually provide good dividends. These tend to be in consumer industries which continue to do well even in more difficult economic times. If your stocks give you a good dividend income, this offsets the risk of their value falling.
• Don’t be afraid to consider alternative investment strategies like real estate investment trusts or inflation-protected securities, but of course get good advice before you invest.

The recent share market plunges have had huge effects on retirees, or more particularly on the funds that should be funding their retirement. Money Magazine recently gave advice on how to deal with the sudden (and massive) drop in value your retirement portfolio may have sustained, particularly if you are already retired and needing to use this money to live on.

One important thing is not to panic and change your investment strategy out of stocks and into safe (but low yielding) funds - it’s too late for this to have a positive impact. Instead, you should focus on how you can live now on less and calculate how much you can safely withdraw from your retirement portfolio to live off while still having the best chance that your funds will not run out.

For example, if you’re fairly newly retired you should be calcuating that your funds need to last you for 30 years. Experts suggest that if you withdraw 4% of the total in the first year, and then a similar amount (but adjusted for inflation) every year thereafter, this fund should last 30 years. However, if the value has dropped dramatically, you should now recalculate the 4% value based on the current worth and that might mean making lifestyle changes like forgoing a vacation, getting part time work or selling assets.

It seems that the annuity policies that were not popular during the 90s are now being seen as a good alternative for at least part of your savings to fund your retirement.

What is an annuity policy? Basically, you pay in a lump sum, and in exchange get an income either monthly, quarterly or annually, for either a set number of years or for the rest of your life. This payout might be fixed or it might be variable depending on portfolio performance - you can choose.

What are the advantages of an annuity policy? Security. You know how much you’ll get and for how long (possibly forever, and if you live to a particularly ripe old age, this is a real bonus). You can also add on particular options that you might find attractive - for example you could get a higher payment if you become disabled or need care. And for other additional fees you are also able to protect yourself against any negative investment performance.

And what are the downsides of an annuity policy? Some of the added extras can cost quite a bit, so do your calcuations carefully and decide if the payoff is worth the extra cost. And the obvious downside, although nobody wants to talk about it, is if you don’t live very long, you don’t get a very good deal.